Wage-push inflation

Wage-push inflation

Wage-Push Inflation

Inflation caused by increased costs as a result of higher wages. To give an extreme example, suppose a state raises its minimum wage from $5 per hour to $30 per hour. In order to be able to pay workers, an employer is forced to significantly increase the prices on his/her products. This in turn makes goods and services more expensive, and the $30 per hour suddenly lacks the purchasing power it had when the minimum wage was $5 per hour. Soon, it is no longer sufficient to purchase necessary goods and services and the minimum wage must be raised again. The cycle starts over, creating an inflation spiral.

Indeed, pass-through effects of high depreciation of the Turkish lira have not completely stopped, while wage-push inflation is ready to enter the scene along with wage increases driven by the minimum wage hike of 30 percent implemented in January.

Furthermore, rising labour costs can also lead to inflation, because workers demand wage increases, and companies usually chose to pass on those costs to their customers, this sort of inflation is called wage-push inflation.

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